Calcutta High Court Rules on Audit Report in PBL Transport Case

In a notable legal development, the Hon’ble Calcutta High Court delivered a significant judgment in the case of PBL Transport Corporation (P) (Ltd.) v. Assistant Commissioner (ST), Writ Petition No. 33477 of 2023 dated January 04, 2024. The court’s decision shed light on the crucial aspect of adhering to principles of natural justice in the context of audit procedures under the GST regime.

Background: The matter at hand involved a writ petition filed by PBL Transport Corporation (P) (Ltd.), challenging the Final Audit Report issued by the Revenue Department. The petitioner contended that the issuance of the Final Audit Report without considering their response to the discrepancy notice amounted to a breach of natural justice.

Key Issue: The central question before the court pertained to the validity of an Audit Report when the response submitted by the Assessee had not been taken into account.

Court’s Analysis and Decision: Upon careful examination of Rule 101(4) of the Central Goods and Services Tax Rules, 2017, the court underscored the obligation of the proper officer to notify the registered person of any discrepancies identified during the audit. Furthermore, the registered person is afforded the opportunity to furnish a response, following which the proper officer is required to finalize the audit findings after duly considering the provided response.

In light of this statutory provision, the court concluded that the failure to consider the Assessee’s response amounted to a clear violation of principles of natural justice. Consequently, the Final Audit Report issued by the Revenue Department was deemed to be invalid.

Court’s Directive: In its ruling, the Hon’ble Calcutta High Court set aside the Impugned Final Audit Report and directed the Revenue Department to reassess the Audit Report only after taking into account the response filed by the Petitioner.

Relevant Legal Provision: The court’s decision was grounded in Rule 101(4) of the CGST Rules, which unequivocally mandates the proper officer to consider the Assessee’s response before finalizing the audit findings.

Conclusion: This judgment serves as a significant reaffirmation of the vital role played by principles of natural justice in administrative proceedings, particularly in the realm of tax audits. It underscores the judiciary’s commitment to upholding fairness and procedural integrity in the application of tax laws, thereby safeguarding the rights of taxpayers and ensuring the rule of law within the GST framework.